News and notes from around town:
• UPDATE: There's confirmation that a major call center company has signed a deal to open a new center in downtown Lawrence with 300 employees.
The Results Companies has signed a lease to occupy 22,000 square feet of space in the lower level of the former Riverfront Mall at Sixth and New Hampshire streets. The Dania Beach, Fla.-based call center company will take over space that had been occupied by Affinitas, until the company closed down its Lawrence operations earlier this year.
The Results Companies handles customer service operations for a variety of Fortune 500 companies, and local leaders said they expect Results consistently will employ more people than Affinitas had in recent years.
"From what we have been told, we think the positions will be a little bit higher end positions, which may translate in to better things from a wage standpoint," said Doug Brown, a broker with Lawrence's McGrew Commercial Real Estate, who negotiated the deal.
An estimate on wage levels the company may offer wasn't immediately available Friday afternoon. Brown said he expects the company to begin operations in the space by Sept. 1.
According to the company's website, Results has revenues in excess of $80 million and operates six U.S. call centers and four international centers. The site says it looks to locate call centers in "communities with small-town values, where courtesy and empathy are a way of life."
The 22,000 square-foot space in the Riverfront is owned by members of the Simons family, who also own The World Company. The World Company is the parent company of LJWorld.com and the Journal-World.
• It seems like there is always a number to focus on when it comes to the project at Ninth and New Hampshire streets.
For the longest time it was the number 4. As in four stories. Developers said they had to have four stories to make a proposed hotel/retail project on the southeast corner work. Neighbors argued anything over three would damage the adjacent historic neighborhood.
Thus far, the development group, led by local businessmen Doug Compton and Mike Treanor, has prevailed on that front. City commissioners have approved plans for a four-story building.
But now city commissioners will begin focusing on a new number: $12 million. Commissioners at their Tuesday evening meeting will be asked to take a key vote to move forward a package of incentives for the project that is worth about $12 million.
The incentives package appears to have an inside track to approval Here’s why:
— City commissioners won’t have to find $12 million in their current budget or future budgets to pay for this incentive package. The incentives are proposed to be funded by two types of tax mechanisms that rely on new tax revenues rather than existing revenues.
The first is called Tax Increment Financing. How a TIF works is that the new property and sales taxes generated by new development will be used to pay for the incentive. Here’s a simplified example: If a piece of property generates $10 in property and sales taxes now, but will generate $100 in property and sales taxes once a new building is constructed, then the city, the county and the school district would get to keep its current $10 in taxes, but the remaining $90 in taxes would go to pay for the incentive.
The second method is called a Transportation Development District Tax. This one is simple to understand: It is just a new sales tax folks will have to pay. The proposal in this case is to charge a new 1 percent sales tax on purchases made in the new development. The new tax wouldn’t extend communitywide or even throughout downtown. It only would be on the purchases made within the new buildings constructed. One question on this one will be whether the new developments will have to post signs notifying customers of the special tax. That became quite an issue with city commissioners during the last election.
— The city is making the developers take the risk on the project. The developers don’t get their $12 million up front (technically, it is estimated at $11.8, but what is $200,000 among friends?) The city will pay the developers annually, based upon the amount of tax revenues the new development actually creates. If the development produces less tax revenue than projected, then the developers are out of luck. The city is under no obligation to make up the difference.
This is much different than how the city structured its first TIF deal way back in 2000. That was when the city used a TIF to help pay for a portion of the public parking garage in the 900 block of New Hampshire. Back then, the city financed the costs of the approximately $8 million garage, and the city would reimburse itself with the tax revenue created by the new development. When the development and the tax revenue largely did not materialize, guess who was out of luck then? Yeah, the city. The city apparently didn’t like that feeling because it does not structure TIF deals like that anymore.
— City commissioners, it appears, believe this project won’t happen without the financial incentive. Commissioners have received reports from an outside consultant they hired, which say the projects can’t be expected to make an average rate of return for the developers, unless the incentives are granted. Actually, the reports state even with the incentives, the projects don’t make an average rate of return. That has led the consultants to say the projects have a thin profit margin regardless, thus it would be really unlikely for the developers to build the projects without the incentive. At the end of the day, only the developers know whether they would build the project if they don’t get the incentives. I hear from people frequently that this is the part they really don’t like about the incentives game played at City Hall. It is basically poker. Who is bluffing and who is not?
— City commissioners like people living downtown. In addition to the much debated multistory hotel/retail project on the southeast corner of the intersection, this incentive package also assumes a multistory apartment and office building on the northeast corner of the intersection. I say assumed because those plans haven’t yet been approved by the city. But as proposed, the northeast building would add a little more than 100 new apartments to downtown. City commissioners have been pretty united that more people living in downtown will be good for the health of downtown.
— City commissioners like parking downtown. The apartment/office building is expected to have about 120 spaces of below-ground parking. The hotel/retail project is expected to have about 115 spaces of below-ground parking. Both of the underground parking garages would be private, not public, parking spaces. But thus far, commissioners have seemed to adopt the philosophy that even the addition of private parking will help address the parking concerns in downtown Lawrence.
So, those are the reasons the nearly $12 million incentives package may sail to approval at City Hall. If there is a stumbling block, though, it may be this:
— City commissioners are going to have to significantly alter a financial deal made with the public. This goes back to the public parking garage that was built in the 900 block of New Hampshire. When that garage was built around 2001, the city told the public it expected TIF revenues to pay for about 50 percent to 60 percent of the garage’s costs.
Well, that certainly hasn’t happened thus far. Based on documents from the city, it appears the city has made about $7.44 million worth of bond payments on the garage since 2001. From those same documents, it appears the new development that is part of the garage’s TIF district has contributed less than $500,000 to the project. My abacus is missing a couple of beads, but that’s not 50 percent. It is about 6 percent.
That percentage will start going up because the new apartment/office/commercial building at 901 N.H. — also built by a group led by Compton and Treanor — will start generating TIF revenues. But no one is projecting it will generate enough new taxes to get the district up to the 50 percent contribution once expected by the city.
But here is the other part of the deal the city made with the public. When the garage was built, the plan included any development built on the southeast corner of Ninth and New Hampshire also would contribute to paying off the garage. The deal was all new property taxes generated by new development (and I think all new sales taxes too) were to be used to pay for the garage.
But now the city is proposing to delete that part of the plan. It wants to take the property at the southeast corner of Ninth and New Hampshire streets out of the garage’s district. Instead, the new tax revenues from the hotel/apartment building would be used to help pay for the new $12 million incentive package.
The city, however, is proposing that $850,000 of the new tax revenue from the hotel/apartment complex should be paid toward the garage over a period of 10 to 20 years.
The city concedes the $850,000 amount is less than what would be paid toward the garage if the city simply left the southeast corner in its original district. How much less isn’t entirely clear in the city memos I have seen, and it will take more math on my part to come up with a number. But given that TIF revenues aren’t going to come anywhere close to paying for the 50 percent to 60 percent of the garage as once expected, it will be interesting to see if there will be any objections made to not capturing as much revenue as possible for the garage.
Of course, I think the concern at City Hall is if the taxes from the new hotel/retail project aren't used to help pay for the $12 million incentive package that both new projects may not happen. As the saying goes, a small percentage of something is better than 100 percent of nothing. That seems to be what commissioners are thinking these days.
• It is Friday, so it wouldn’t be complete if we didn’t speculate about a new restaurant for downtown. My understanding is that Doug Compton is close to signing a deal for a new wine bar to occupy the one piece of vacant space he has in his 901 building at Ninth and New Hampshire.
What I hear is that the owner of an existing downtown eatery is planning to open the wine bar in conjunction with an area caterer. I’ve heard the name of the restaurant owner, but I am waiting to get in touch with him. I’ll report back when I do.
As far as the space goes, it will be in the northwest corner of the building, along the Ninth Street side. The area has a little outdoor seating area attached to it.
• Another week, another set of land transfers from the Douglas County Register of Deeds.
Of note, it appears a company headed by Lawrence businessman Roger D. Johnson bought a couple of commercial pieces of property at 1100 E. 25th St. and 1200 E. 25th St. from Lawrence Bank.
Click here to see the complete list of land transfers for the week ending July 16.